澳洲幸运5官方开奖结果体彩网:Cash value equals the sum of money that grows in a cash-value-generating annuity or permanent life insurance policy. 澳洲幸运5官方开奖结果体彩网:Surrender value, on the other hand, is the actual amount of mone🎃y a policyholder will receive if they try to withdraw all of the policy's cash value.

When reading the contract for your annuity or permanent life insurance policy, you'll encounter insurance industry terms such as these two that may sound similar, but mean very different things. The differences between these concepts are sometimes small, but they can make a big difference if you need to pull money from your policy.

Cash Value

Cash value, or account value, is equal to the sum of money that you have inside that cash-value–generating annuity or 澳洲幸运5官方开奖结果体彩网:permanent life insurance policy. It is the money held in your account.

Your insurance provider allocates some of your premium toward the cost of insurance and some toward your cash value account. The cash value money is invested—such as in a bond portfolio—and then your policy is credited based on the performance of those investments, as well as any dividends the policy earns.

The cash value and surrender value aren't the same as the policy's face value, which is the 澳洲幸运5官方开奖结果体彩网:death benefit. However, outstanding 澳洲幸运5官方开奖结果体彩🎃网:loans against the policy's cash value can reduce the total death benefit.

In the U.S., it is technically illegal for a 澳洲幸运5官方开奖结果体彩网:life insurance policy to market itself as an investment vehicle. Still, many policyholders use their 澳洲幸运5官方开奖结果体彩网:whole life, 澳洲幸运5官方开奖结果体彩网:universal life (UL), or 澳洲幸运5官方开奖结果体彩网:variable unive✤rsal life insurance (VUL) policies to grow tax-advantaged retirement assets.

They do this by using their cash value funds for so-called living benefits. These include low-interest loans against the cash value in the policy or partial withdrawals. As you make withdrawals or fail to repay loans, the death benefit also reduces. If you withdraw all of the cash value, you surrender it and the policy canceled.

Surrender Value

The surrender value is the actual sum of money a policyholder will receive if they try to access the cash value of the policy. Other names for this include the surrender cash value or, in the case of annuities, annuity surrender value.

In most 澳洲幸运5官方开奖结果体彩网:whole life insurance plans, the cash value is guaranteed, but it can only be surrendered when the policy is canceled. Policyholders may borrow or withdraw a portion of their cash value for current use. In universal life insurance plans, the cash value isn't guaranteed. However, after the first year or two, it may have enough cash value built up to be partially 澳洲幸运5官方开奖结果体彩网:surrendered (withdrawn).

Often, your insurance company will charge a penalty for withdrawing all of the cash value from a policy before a specified amount of time has passed. Because your insurance provider doesn't want you to stop paying premiums or request an early withdrawal of funds, it often builds different fees and costs into policies to deter you from canceling your policy. In most cases, these penalties are the difference between your policy's cash value and surrender value.

The 澳洲幸运5官方开奖结果体彩网:surrender fees will reduce your surrender value. These costs and the p🐟olicy's surrender value can fluctuate over the life of a policy. After a certain time period, the surrender costs will no longer be in effect. At this point, your cash value and surrender value will be the same.

The process through which you access your cash surrender value varies based on the policy you have, but many require that you 澳洲幸运5官方开奖结果体彩网:cancel the policy before accessing the funds.

The SECURE Act and Surrender Fees

Prior to the Setting Ever♔y Community Up for Retirement Enhancement (SECURE) Act of 2019, people who held annuities in an employer-sponsored retirement account—such as a 401(k) plan—faced the possibilit⛎y of paying surrender charges and fees if they changed jobs or their employer discontinued offering annuities as a retirement option.

However, the SECURE Act makes annuity plans offered in a 401(k) portable. This means participants can transfer their annuity plan to another employer-sponsored plan or 澳洲幸运5官方开奖结果体彩网:individual retirement acco𒅌unt (IRA) without l﷽iquidating their annuity and paying surrender fe🌌es.

Special Considerations

Many people choose whole life insurance products that include a cash-value feature. With this feature, a portion of each monthly premium deposits into a cash account within the policy. This cash accu🎃mulation is invested in approved funds and grows tax-free, which is the reason many policyholders use the cash account as a form of retirement account. When used this way, policyholders will often pay more than the required monthly premium to build a tax-free cash account.

In 1988, the Technical and Miscellaneous Revenue Act (TAMRA) set limits on cash held in these accounts. Called the seven-year pay test, it determines if premiums paid within the first seven years of a policy's life amount to more than was required to be paid into the account. If this total is more, an account is deemed a 澳洲幸运5官方开奖结果体彩网:modified endowment contract (MEC) and becomes subject to having 澳洲幸运5官方开奖结果体彩网:gains from the cash account taxed as regular income. In other words, you lose the ♊ability to take tax-free withdrawals from the cash value for the rest of the life of the policy.

Cash Value vs. Surrender Value Example

Suppose you purchase a whole life insurance🥀 policy with a death benefit of $200,000. After 10 years of making consistent, on-time payments, there is $10,000 of cash value in the policy. You consult your insurance contract and see that th🔯e surrender charge after 10 years is equal to 35%.

This fee means if you tried to cancel your policy after 10 years and withdraw ꦿyour cash value, the i💫nsurance provider will assess a $3,500 charge to your cash value, leaving you with a surrender value of $6,500.

The Bottom Line

Cash value is money that builds in a cash-value-generating annuity or permanent life insurance policy. It's important to understand that surrender value is instead the actual amount of money you will receive as a policyholder if you try to withdraw all of the policy's cash value.

With most whole life insurance plans, cash value is guaranteed, but can only be surrendered 澳洲幸运5官方开奖结果体彩网:when the policy is canceled. These policyholders may borrow or withdraw some of their cash value for current use. Remember that varying surrender fees will reduce your surrender value, but afte🐎r a certain amount of time, usually at least 10 years, the surrender costs of whole or universal life policies will go away. At that point, your cash value and surrender value become the same.